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For Whom the Agreement Tolls: Tolling Agreements May Not Toll Claims Against Non-Signatory Defendants

By Jonathan H. Krol

March 28, 2018

In Seniah Corp. v. Buckingham, Doolittle & Burroughs, LLP, Ohio’s Fifth District Court of Appeals ruled in favor of a defendant attorney because the legal malpractice claims at issue—which are subject to a one-year statute of limitations—were time-barred. 5th Dist. Stark No. 2017CA00109, 2018-Ohio-855. While this result itself is not altogether unusual, the court’s analysis of a tolling agreement in connection with those claims makes this case noteworthy.

In 2010, Plaintiff Seniah Corporation retained attorney Patrick Keating and his law firm, Buckingham, Doolittle & Burroughs, to represent it in two legal matters: a foreclosure action and a Chapter 11 bankruptcy.

Seniah claimed that Keating committed malpractice on two occasions during these proceedings. The foreclosure action ended in September 2011, and the bankruptcy case closed in November 2011. With the closing of the bankruptcy, the attorney-client relationship between Keating and Seniah also ended and the one year statute of limitations began to accrue.

On July 24, 2012, Seniah sent a letter to Keating to advise him of a potential legal malpractice claim and asking for possession of the file and for a meeting to discuss the matter. Keating gave the letter to his firm’s general counsel.

On August 6, 2012, general counsel sent a response letter to Seniah indicating she was in receipt of the letter and that the firm was “investigating” the matter. On September 21, 2012, general counsel, Keating, and Seniah met to discuss the legal malpractice allegations. At no time did the general counsel state one way or another whether she represented Keating in addition to Buckingham.

The parties did not reach a settlement at the meeting and Seniah was growing concerned about the statute of limitations (set to expire in November 2012). As a result, in early October 2012, Buckingham’s general counsel drafted a tolling agreement as between Buckingham and Seniah; Keating was not listed as a party to the agreement, nor was he a signatory of it.

After further unproductive negotiations and a failed mediation, Seniah filed a legal malpractice lawsuit on February 19, 2013. After a long and sordid procedural history, the trial court eventually granted summary judgment in favor of Keating based on the expiration of the statute of limitations. Seniah then appealed that ruling to the Fifth District Court of Appeals.

On appeal, the court noted that the one-year statute of limitations expired by November 2012 – three months before the complaint was filed. The only way the claims against Keating could proceed was if the tolling agreement extended the time limits for those claims.

Addressing this issue, the appellate court noted that a tolling agreement is a contract and the role of the court is to give effect to the intent of the parties as reflected in the language of the contract. The plain language of the agreement stated that the tolling agreement was between Buckingham and Seniah. Because Keating was not named in the Agreement and did not sign it, the agreement did not extend to claims against him.

In so finding, the court rejected Seniah’s argument that Keating was bound under the broad list of individuals (“heirs, successors, assigns, shareholders, members, officers, directors, agents, or insurers”) intended to be bound by the agreement. The court found that Keating was not seeking to defend against Seniah’s claims as a shareholder on behalf of Buckingham. Instead, he was seeking to defend Seniah's claims against him in his individual capacity. Thus, Keating did not fall within the express terms of the Tolling Agreement.

The court also rejected Seniah’s argument that Buckingham’s general counsel, who signed the agreement, was acting as an agent of Keating and had authority to bind him to the terms of the agreement. Because nothing in the record demonstrated that general counsel was representing Keating with respect to pre-suit negotiations or the tolling agreement, and both Keating and the general counsel denied that she was, the court found that the general counsel was not acting as Keating’s agent in entering the tolling agreement.

Finally, the court rejected Seniah’s ratification and estoppel arguments, finding that those doctrines did not apply under the facts of the case. As a result, the court affirmed the trial court’s entry of summary judgment in favor of Keating.

The importance of eliminating claims against individual defendants is magnified in legal malpractice cases because the Supreme Court of Ohio has held that individual attorneys practice law, and therefore a law firm cannot directly commit legal malpractice. See Natl. Union Fire Ins. Co. v. Wuerth, 122 Ohio St.3d 594, 2009-Ohio-3601, 913 N.E.2d 939. As a result, a firm can only be vicariously liable for malpractice when a principal or associate is liable for malpractice. Id. In other words, if the individual attorney is dismissed from the case (because of the statute of limitations or otherwise), the lawsuit cannot simply proceed against the law firm alone.

Although the Seniah case involves legal malpractice claims and the Wuerth analysis discussed above renders the decision most poignant in the malpractice context, Seniah is potentially relevant to other types of cases that involve a tolling agreement left unsigned by certain parties. Just because a corporate entity/employer may enter into a tolling agreement in its own right does not mean that other parties—even those closely related to signing parties—are subject to its terms.

Whatever the facts or circumstances may be, lessons learned from the Seniah case should be considered while negotiating and drafting tolling agreements as well as when attempting to enforce or avoid them in court.

If you have any questions regarding Seniah Corp. v. Buckingham, Doolittle & Burroughs, LLP, or if you wish a copy of this opinion or otherwise have a question regarding tolling agreements or legal malpractice issues, please feel free to call any one of our Legal Professional Liability Group Members.

This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.